Joe Biden has launched a trade initiative with 12 Indo-Pacific countries, in his first serious effort to boost economic engagement in the region as the US seeks to counter a more assertive China.
Biden unveiled the Indo-Pacific Economic Framework in Tokyo on Monday after meeting Prime Minister Fumio Kishida on his first visit to Asia as US president.
Jake Sullivan, US national security adviser, said allies such as Japan, Australia, New Zealand and South Korea would join the agreement. India and seven south-east Asian nations — Singapore, Malaysia, Indonesia, Vietnam, the Philippines, Thailand and Brunei — will also join IPEF, which includes nations that represent 40 per cent of the global economy.
“The fact that we have such a range, and a significant number of partner countries in on the ground floor for the launch . . . indicates that there’s deep interest across the region,” said Sullivan, who added that the Indo-Pacific was projected to be the biggest driver of global growth for 30 years.
US commerce secretary Gina Raimondo said IPEF was an “important turning point in restoring US economic leadership in the region” that would provide countries with “an alternative to China’s approach”.
China is part of a separate broader trade deal in the region, the 15-member Regional Comprehensive Economic Partnership, or RCEP, that also includes Japan and South Korea as well as the 10 Asean members. Analysts had said RCEP would further diminish the economic role of the US in the Indo-Pacific.
IPEF contains four pillars: trade; supply chains; clean energy and infrastructure; and tax and anti-corruption.
Biden hopes IPEF will blunt criticism that he has not included a trade component in his security-heavy Indo-Pacific strategy. Many countries want the US to join an 11-nation trade deal that was rebranded the Comprehensive and Progressive Agreement for Trans-Pacific Partnership after President Donald Trump left the Trans-Pacific Partnership in 2017.
Katherine Tai, US trade representative, said there had been insufficient support in Congress for TPP, a traditional trade deal that lowered tariffs to boost market access. She said IPEF was tailored to the modern economy and would include an important component on digital trade.
“Our aim is for IPEF to address the challenges in the 21st-century global economy,” Tai said.
One US official said IPEF members would spend two weeks deciding how many of the four pillars they wanted to join. She said Washington hoped to finalise agreements for each pillar within 12 to 18 months, and that deals on one or more pillars could be concluded before agreement on the remaining ones.
The official added that the Biden administration would attempt to show the IPEF countries that the agreements would be durable by keeping the US Congress fully informed during the negotiations to increase buy-in from American lawmakers and avoid the political problems that derailed TPP.
Many countries, particularly in south-east Asia, were initially lukewarm because IPEF did not provide US market access. Japan urged the US to change the launch statement to make it easier for countries to join IPEF by saying it would start with consultations that would lead to negotiations.
Illustrating those concerns, Arsjad Rasjid, chair of the Indonesian Chamber of Commerce and Industry, suggested it was difficult to commit to IPEF at this stage because there was a “lack of transparency”.
“How can we make a comment, how can we actually support it if we don’t understand what it is?” asked Rasjid. He said that he would like to see access to the US market added to IPEF.
Japan has backed the US push for IPEF as the “next best alternative” to CPTPP given the slim chances of a US return to a traditional trade agreement.
Tokyo views IPEF as symbolically critical for the US to maintain economic influence in the region even if the agreement pales in comparison with CPTPP. Japan urged the US to be flexible, and focus on digital trade as an alternative to providing market access.
“Considering the position the US is in at the moment, the IPEF gives the US its best shot to take an initiative in the region and maintain its economic presence,” said Kenichiro Sasae, a former Japanese ambassador to Washington who heads the Japan Institute of International Affairs. “That is why Japan is going to support it.”
The US did not ask Taiwan to join IPEF, partly because south-east Asian countries were concerned about antagonising China. Some experts have questioned how the US can complete a meaningful agreement on supply chains without Taiwan, the most important manufacturer of semiconductors.
The US official said Washington was “thinking about things we can do with Taiwan in parallel” that would ensure that any final agreement on supply chains in IPEF dovetailed with separate efforts involving Taipei.
Additional reporting by Oliver Telling in Singapore
Follow Demetri Sevastopulo and Kana Inagaki on Twitter
Source: Economy - ft.com
